We put a lot of Volume Profile charts on this blog. Viren’s last post here is an excellent example of Volume at price in action.
There is another part to Market Profile based on time-price as opposed to volume-price.
Time- price or Price Profile charts give us a better picture of the larger trend sometimes going inside the candle to see what buyers and sellers are doing.
The above chart is that of the Nifty future as of the close yesterday.
Notice that the candles have been replaced with letters A, B, C, D etc.
Each letter represents a 30 min period starting with A at 9.15, B at 9.45, C at 10.15 and so on.
What it helps to identify is periods where the buyers and sellers agreed on price and periods where they didn’t.
So you will notice a lot of letters A,B,C,D, E etc at particular price points and single letters like A or P or Q at other points.
These represent the two extremes of the Auction Process also called Market Profile.
As in a traditional auction, the volume is thickest at the points where the participation is more and thins out as bidders/ sellers outdo each other. You can safely say that the winner of any auction has got the most unfair price in the room.
So in the above chart the Guys who sold at points Q and D on 20/ 21st Oct lost out or got an unfair deal.
The red lines represent the highest volumes for the day also called Point of Control or POC.The market will always gravitate towards the POC from either direction.
The single prints represent the excess of the market or the other side when the market was not fully balanced or away from value.
In the chart above we see single prints at 5985 and at 6315. These represent the extremes of the current bracket.Within this bracket we have a smaller bracket developing between 6000 and 6160. A break of 6000 or 6160 now would be good for an easy 80 points towards the next levels as indicated.
The green shaded letters represent value areas.Value has gone sideways this week indicating a side-ways range.Play the range.
In the bank Nifty charts, 12310 is firming up as an important support above 12225.
12540, 12620 and 12690 represent unfair auctions and overcoming one will take you to the other.
All important levels are marked in the charts.Please keep them for reference.
Have a happy trading week ahead.